What You Need to Know about Kentucky Tax Law Changes
Kyle Thorpe
Jun 23, 2022

An array of additional services will be subject to sales tax in Kentucky next year under a bill enacted over the governor’s veto.
The legislation also reduces personal income tax rates in Kentucky with further reductions taking effect annually under certain conditions, with the goal of eventually eliminating the state income tax entirely.
Supporters say the changes will promote economic growth for the state in the short term while paving the way for future, pro-growth reform. Detractors, including the governor, cite the potential harm to public safety, economic development incentives, and the state’s long-term economic security.
For some entrepreneurs doing business in Kentucky, however, the impact is more direct. Here’s what you need to know.
Individual Income Tax Changes
The legislation calls for the gradual reduction, and potential elimination, of Kentucky’s current 5% individual income tax rate.
Beginning January 1, 2023, the tax rate will drop to 4%, and further rate reductions in increments of 0.5%, will be applied in future years if certain conditions are met by the state.
Sales Tax Expansions
To offset the loss in income taxes, the legislation creates new and expanded sales taxes on certain services. Kentucky currently imposes sales and use taxes on 17 specific services. The legislation adds 35 new categories to the list, also effective January 1, 2023.
Highlights from the list of newly taxable services includes:
- Admissions (except nonprofit and those previously exempted)
- Athletic instruction
- Cosmetic surgery
- Household moving
- Interior decorating and design services
- Marketing services
- Massage (except when medically necessary)
- Parking
- Personal fitness
- Prepaid and prepaid wireless calling service
- Prewritten computer software access services
- eg. cloud software/software as a service (SaaS)
- Recruiting services
- Rental of any room or rooms, lodgings, campsites, or accommodations
- Website design and development
Businesses providing the newly taxable services must begin collecting sales tax when the legislation takes effect in January. If you buy services in one of these categories, you should anticipate a 6% increase in costs.
Business owners should prepare clients for any hike in fees. They are also required to register with the state to pay the sales tax. Accounting software and/ or point-of-sale (POS) systems will also have to be updated to collect sales tax and track sales.
Electric Vehicles
Buying and owning electric vehicles (EV) in Kentucky will also be subject to a vehicle charging tax, as well as – beginning January 1, 2024 – initial and annual registration fees of $120 for an EV and $60 for hybrid vehicles.
The charging tax will be a minimum of $0.03 kilowatt per hour with likely annual increases. To put the rates in perspective, a full charge on a 50KW Tesla would be taxed $1.50 in addition to the cost of charging.
How We Can Help You Navigate Kentucky Tax Changes
At Kirsch CPA group, our strategic tax planning services are designed to ensure that taxes never come between you and the success of your business. That means never paying more than you should or being caught off-guard by business circumstances, changing laws or changes to your tax status.

About The Author
Kyle is driven by teamwork. He aspires to help the team to provide business owners with solutions to…
Tags
Sign Up for Email Updates
Related Articles
























Prevent a Poorly Structured Chart of Accounts from Hiding Your Profitability
- 01-06-22
- Nick Roell















Entrepreneurial Mindset: Kirsch CPA Group Sets a Framework for Growth
- 10-28-21
- Kirsch CPA Group






























What Your Numbers Are Saying: Are You Listening?
Part 2: How Attractive Is Your Balance Sheet?
- 07-19-21
- Kirsch CPA Group















What Your Numbers Are Saying: Are You Listening?
Part 1: Do You Know Your Profitability?
- 06-09-21
- Kirsch CPA Group




































Using Cash Flow Forecasting to Avoid Problems & Grow Your Business
- 04-07-21
- Kirsch CPA Group









Selecting the Right Payroll System for Your Construction Business
- 04-01-21
- Kirsch CPA Group















Self-Employed May Be Eligible for COVID-Related Tax Breaks for 2020
- 03-17-21
- Kirsch CPA Group






COVID-19 Relief: Overview of the New American Rescue Plan Act for Individuals
- 03-17-21
- Kirsch CPA Group



COVID-19 Relief: Business Overview of the New American Rescue Plan Act
- 03-17-21
- Kirsch CPA Group



























Opportunity Zone Investments: A Tax Deferral Opportunity You May Have Overlooked
- 02-17-21
- Kirsch CPA Group




































The Status of Temporary COVID Tax Relief Measures After the New Law
- 01-21-21
- Kirsch CPA Group















8 Accounting Practices for a Financially Healthy Construction Business
- 01-07-21
- Kirsch CPA Group









Appropriations Law Adds Some Business Tax Breaks and Extends Others
- 01-07-21
- Kirsch CPA Group



























Contending With the Patchwork of State Requirements for Nonprofits
- 12-17-20
- Kirsch CPA Group




































Employee or Independent Contractor? The Rules May Be Getting Simpler
- 11-12-20
- Kirsch CPA Group









Do the COVID-19 Extended Deadlines for Health Plans Still Apply?
- 11-12-20
- Kirsch CPA Group












Using Remote Workers? Protect Sensitive Company Data from Exposure
- 10-28-20
- Kirsch CPA Group













































What You Need to Know About the Deferral of Payroll Tax Obligations
- 09-15-20
- Kirsch CPA Group









Hobby or Business? How to Treat COVID-19 Sideline Activities for Taxes
- 09-15-20
- Kirsch CPA Group















Monitor These 3 Things as COVID-19 Changes Your Nonprofit’s Priorities
- 08-11-20
- Kirsch CPA Group












FASB Offers Reprieve from Updated Lease and Revenue Recognition Rules
- 07-23-20
- Kirsch CPA Group






COVID-19 Crisis May Affect Tax Angles for Rental Property Losses
- 07-10-20
- Kirsch CPA Group









Last-Minute Strategies for Businesses that Deferred Filing Tax Returns
- 07-01-20
- Kirsch CPA Group









Can Your Business Survive and Even Thrive in These Trying Times?
- 06-18-20
- Kirsch CPA Group






Five COVID-19 Obstacles a Construction Company Needs to Navigate
- 06-12-20
- Kirsch CPA Group












Cash Flow Tip: Postpone Payment of Certain Federal Employer Payroll Taxes
- 04-20-20
- Sue Schloemer


















Tax Filing Deadline Remains April 15 – Payment Due Extended to July 15
- 03-19-20
- John Kirsch










































8 strategies to help you adapt to economic down turn without layoffs
- 02-24-18
- Diane Glover





















Which Research Activities Qualify for the Qualified Small Business Tax Credits
- 07-17-17
- Diane Glover





































